• American States Insurance Company v. Travelers Property Casualty Company of America (January 27, 2014) - Cal.Rptr.3D -, 2014 WL 284540
  • February 17, 2014
  • Law Firm: McCormick Barstow Sheppard Wayte Carruth LLP - Fresno Office
  • UNDERLYING CLAIM

    Royal Catering Company ("Royal") leased a food truck to Esmeragdo Gomez, who operated the truck with his wife, Irais Gomez. The truck was equipped by Royal with a specially designed deep fryer, grille, steam table, oven, refrigerator and coffee maker. The truck was not equipped to transport persons other than a driver and a cook. On the day of the accident, Mr. Gomez was driving the truck while a guest sat in the truck's passenger seat and Mrs. Gomez stood in the rear of the truck. At an intersection, Mr. Gomez swerved to avoid an approaching truck but failed to avoid a collision. Just prior to the collision, hot oil splashed on and burned Mrs. Gomez. The Gomezes and the passenger brought an action against Royal and others for injuries sustained in the accident. The Gomezes asserted causes of action against Royal for products liability (negligence), products liability (design defect), negligent infliction of emotional distress and property damage. Royal tendered the Gomez action to American States Insurance Company ("American States") under an auto policy issued to Royal. American States agreed to defend under a reservation of rights. Royal and American States tendered the Gomez action to Travelers Property and Casualty Company of America ("Travelers"), which issued a commercial general liability ("CGL") policy to Royal. Travelers declined to provide a defense. American States negotiated a settlement with the Gomezes whereby American States paid $500,000 to the Gomezes to settle all possible claims against Royal under the American States auto policy. Under the settlement, the Gomezes could pursue their products liability claims against Royal, but only to the extent such claims were covered by the Travelers CGL policy.

    American States, Royal and the Gomezes submitted the Gomez action to binding arbitration with the only issue concerning Royal's liability on a products liability theory-i.e., that Royal provided a defective deep fryer basket which caused the hot oil to spill on Mrs. Gomez. Royal stipulated to liability on a products liability theory but challenged the amount of damages and the apportionment of fault. The arbitrator found that the responsibility for the accident lies with the driver of the truck that collided with the Gomezes' food truck, the admitted negligence of Royal in failing to provide the proper fryer basket, the negligence of Mr. Gomez in allowing his wife to remain unrestrained in the rear of the truck and Mrs. Gomez's negligence in failing to take proper precautions for her own safety. Based on the arbitrator's award, a stipulated judgment was entered against Royal on Mr. Gomez's loss of consortium claim and Mrs. Gomez's product liability claim in the total amount of $2,428,577.34 including costs.

    American States brought an action against Travelers seeking a declaration that Travelers had a duty to defend Royal in the Gomez action. Travelers cross-complained against American States, the Gomezes and Royal seeking a declaration that Travelers had no duty to defend or indemnify Royal in the Gomez action. American States moved for summary judgment, arguing that Travelers had a duty to defend and indemnify Royal in the Gomez action because the Gomezes' food truck was "mobile equipment" and thus not subject to the "auto" exclusion in the Travelers CGL policy. American States further argued that the Gomez's food truck and the equipment installed in the truck was a "product" covered by the Travelers CGL policy and excluded from coverage under the American States auto policy. Travelers moved for summary adjudication, arguing that it did not have a duty to defend or indemnify Royal in the Gomez action because the "auto" exclusion in its policy precluded coverage. Travelers further argued that American States had a duty to defend and indemnify Royal in the Gomez action under the American States auto policy because the Gomez's food truck, a covered auto under that policy, was in an accident. The Travelers CGL policy defined "auto" as "a land motor vehicle, trailer or semitrailer designed for travel on public roads, including any attached machinery or equipment. But 'auto' does not include 'mobile equipment.'" "Mobile equipment" is defined by the Travelers policy, in relevant part, as "vehicles . . . maintained primarily for purposes other than the transportation of persons or cargo."

    The trial court granted Travelers' motion for summary adjudication and denied American States' motion for summary judgment. The trial court held that the Gomezes' food truck was an "auto" and not "mobile equipment," reasoning that "the whole point of this endeavor is to move food and other items to places where people are waiting to buy them" and that food was the "cargo" the Gomez's truck transported. American States, Royal and the Gomezes appealed.

    THE APPELLATE COURT'S RULING

    The court of appeal reversed the trial court's ruling and found that the Gomezes' food truck was "mobile equipment" and not an "auto." The court of appeal found that the primary purpose of the Gomezes' food truck was to serve as a mobile kitchen and not to transport persons or cargo. See Employers Mutual Casualty Company v. Bonilla (5th Cir. 2010) 613 F.3d 512, 518 ("the 'inherent purpose' of a mobile catering truck certainly could be seen as including the use and maintenance of its kitchen facilities."). The court of appeal further noted that the Travelers policy's definition of "mobile equipment" supports the conclusion that the Gomezes' food truck was "mobile equipment" and not an "auto." The definition specifically identified self-propelled, special use vehicles which, with certain types of permanently attached equipment, were considered to be "autos," including equipment designed primarily for snow removal, road maintenance, and street cleaning. The court of appeal held that even though the Gomezes' food truck, like the identified special use vehicles, had permanently attached equipment that permitted it to perform a specialized task-i.e., cook food-Travelers did not include food trucks among the vehicles identified as "autos" and thus it was not subject to the "mobile equipment" exception to the auto exclusion. Indeed, the court of appeal noted that "if Travelers had intended to exclude food trucks from coverage as 'autos'-a significant consideration in light of the fact that Royal maintained a fleet of food trucks and was in the business of leasing such vehicles-it would have identified them along with the other special use vehicles it identified as 'autos.'" 

    The court of appeal further held the American States auto policy did not provide coverage for the product liability claims because the policy excluded from coverage claims arising out of the equipment furnished in connection with Royal's work. The court of appeal agreed with the argument of American States that the liability in issue arose from equipment furnished in connection with Royal's "completed operations," which was excluded under the American States auto policy. Because the Travelers CGL policy covered product liability claims and the American States auto policy excluded from coverage claims arising out of equipment furnished in connection with Royal's work, the trial court erred when it held that American States, and not Travelers, had a duty to defend and indemnify Royal in the Gomez action.

    EFFECTS OF THE RULING

    In cases involving special use vehicles, courts will look to the primary purpose of the vehicle in determining whether it qualifies as an "auto" for purposes of an auto exclusion in CGL policies.